Author Topic: Stop Overpaying for Lightly Used Cars  (Read 1855 times)

Dicey

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Stop Overpaying for Lightly Used Cars
« on: September 14, 2018, 10:53:11 AM »
A shout-out to JD Roth for this link today. Of course the author doesn't mention the higher cost of insurance, but it's excellent food for thought:

https://jalopnik.com/stop-overpaying-for-lightly-used-cars-1828576980

wheezle

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Re: Stop Overpaying for Lightly Used Cars
« Reply #1 on: October 02, 2018, 08:08:03 PM »
Totally agree. If you're on the market for a Corolla or something, you really ought to consider buying new.

Mississippi Mudstache

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Re: Stop Overpaying for Lightly Used Cars
« Reply #2 on: October 03, 2018, 02:25:47 PM »
A shout-out to JD Roth for this link today. Of course the author doesn't mention the higher cost of insurance, but it's excellent food for thought:

https://jalopnik.com/stop-overpaying-for-lightly-used-cars-1828576980

Interesting. I'm close to being in the market for a "new" car. I was nearly swayed when I found a 2016 Ford Fiesta, new (how did that happen?) for close to the price of the well-used Honda Fits/Accords that I've been looking at. I held back after reading some reviews of the Ford Fiesta, though. Makes me skittish to buy a Ford anyway, given that the only car they'll be producing in the future is a Mustang.

wheezle

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Re: Stop Overpaying for Lightly Used Cars
« Reply #3 on: October 03, 2018, 02:29:02 PM »
... given that the only car they'll be producing in the future is a Mustang.
Yeah, that bothers me. I'm driving a Ford right now, but I think I may turn to the dark side and go Japanese.

SweetRedWine

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Re: Stop Overpaying for Lightly Used Cars
« Reply #4 on: October 04, 2018, 10:29:11 AM »
I've frequently tried to feel the shame I've read that I should have due to buying a new Japanese economy car.  I didn't even contemplate used cars.  How can I consider myself frugal?  Every personal finance blog I've ever read extolls the virtues and intelligence of buying used cars.  I've tried so hard, but I can't feel the shame! 

I'm very happy with my new car.  My next car will more than likely also be purchased new.

SpacemanSpiff

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Re: Stop Overpaying for Lightly Used Cars
« Reply #5 on: October 10, 2018, 11:03:09 AM »
Ha - cool to see this when I just ran into this situation a month ago, and it seemed the prices I was looking at ran contrary to "typical personal finance wisdom" of the first couple years being so depreciation heavy that you'd be crazy to buy new.

One of our Civics just got destroyed after 10 years of loyal service (cumulative repairs of <$500) when it was rear-ended by an uninsured dingbat and insurance declared it a total loss. (was hoping to get another ~5 years out of it)

In looking at new Hondas and Toyotas (base level trim Civics, Corollas, CR-Vs, and RAV4s specifically) compared to any used ones (any trim from those models) that were 2-4 years old, this is exactly the scenario we ran into.  I pored through >50 used cars on Autotrader and other websites before we ended up deciding that even from a bottom line perspective, the new cars were the way to go for us because the price difference for the used cars was so low for base model Hondas/Toyotas.  Also now we have a higher likelihood that the car will last a long time as we know for sure that it will have been properly maintained from day 1.

golden1

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Re: Stop Overpaying for Lightly Used Cars
« Reply #6 on: October 10, 2018, 12:05:45 PM »
Yep used Toyota’s and Hondas are pricey because they have low depreciation, so I think there is definitely justification for buying new. 

SnackDog

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Re: Stop Overpaying for Lightly Used Cars
« Reply #7 on: October 10, 2018, 12:16:47 PM »
In 2008 I purchased a 2007 Outback for AU$32,000, saving $3000 over new.  By 2009 brand new ones had fallen to $31,000 due to the economic collapse.

On the other hand, the clown car I just purchased was a 60% discount to new, 2 years old and in mint condition.

Slee_stack

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Re: Stop Overpaying for Lightly Used Cars
« Reply #8 on: October 11, 2018, 08:31:48 AM »
You'll likely only overpay on lightly used, high-demand vehicles.

Anything in-demand you'll overpay for new as well.

Buy something no one wants and you'll do just fine.

We own a Lincoln (sedan) and a Saab (wagon).  We bought each when they were 3 years old.  They were seriously depreciated because almost no-one in the United states (or possibly anywhere) wants either one.

Both are actually quite nice vehicles too!

When you don't care about impressing even a single other person on the planet with a motorized vehicle, you can do very well on lightly used.  Just choose appropriately.

dcheesi

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Re: Stop Overpaying for Lightly Used Cars
« Reply #9 on: October 11, 2018, 08:45:21 AM »
You'll likely only overpay on lightly used, high-demand vehicles.

Anything in-demand you'll overpay for new as well.

Buy something no one wants and you'll do just fine.

We own a Lincoln (sedan) and a Saab (wagon).  We bought each when they were 3 years old.  They were seriously depreciated because almost no-one in the United states (or possibly anywhere) wants either one.

Both are actually quite nice vehicles too!

When you don't care about impressing even a single other person on the planet with a motorized vehicle, you can do very well on lightly used.  Just choose appropriately.
The demand for Toyotas and Hondas isn't about impressing anyone; it's about consistent reliability, as well as abundant/cheap(ish) repair options when they do break.

The odd-ball cars that no one wants are often expensive to repair (esp. European imports) and/or lack the track record of the aforementioned popular brands/models. Now you can certainly get lucky and wind up with solid non-lemon for a good price, but you're taking more of a risk there vs. the proven reliable models.

Slee_stack

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Re: Stop Overpaying for Lightly Used Cars
« Reply #10 on: October 15, 2018, 02:45:17 PM »
You'll likely only overpay on lightly used, high-demand vehicles.

Anything in-demand you'll overpay for new as well.

Buy something no one wants and you'll do just fine.

We own a Lincoln (sedan) and a Saab (wagon).  We bought each when they were 3 years old.  They were seriously depreciated because almost no-one in the United states (or possibly anywhere) wants either one.

Both are actually quite nice vehicles too!

When you don't care about impressing even a single other person on the planet with a motorized vehicle, you can do very well on lightly used.  Just choose appropriately.
The demand for Toyotas and Hondas isn't about impressing anyone; it's about consistent reliability, as well as abundant/cheap(ish) repair options when they do break.

The odd-ball cars that no one wants are often expensive to repair (esp. European imports) and/or lack the track record of the aforementioned popular brands/models. Now you can certainly get lucky and wind up with solid non-lemon for a good price, but you're taking more of a risk there vs. the proven reliable models.
The reliability differences are nowhere near as drastic as they used to be.   Some would argue that Japanese makes have slipped to LESS reliable.  Isn't Toyota ranked #4?  But what does that even mean?   High performance, esoteric cars are certainly not in the conversation.  Those would almost universally be a bad deal.

In The Millionaire Next Door, the most common vehicle being reported owned was a domestic sedan. 

People still overpay for Hondas and Toyotas in the same way that people continue to buy any brand name.  They think they are getting better, but in reality, they might be paying extra HOPING they also get more.

UNPOPULAR (not odd ball) cars will always be cheaper everything else equal...and reliability today is a very near 'everything else equal'.

While I presume that folks here aren't buying anything to show off....I've absolutely witnessed folks crow about their recent Honda or Toyota purchase as if they've 'upgraded' over something lesser like ugggh Korean...or Domestic!

I personally don't care what badge is on it as long as its the best deal.



radram

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Re: Stop Overpaying for Lightly Used Cars
« Reply #11 on: October 15, 2018, 03:30:31 PM »
For me, I am all about cost of ownership.

For every $1,000 I spend on the cost of a vehicle, I expect to get 1 year of use, and 10,000 miles. I also expect all cars to be worthless after 130,000, so my 10,000 miles per thousand can not go beyond that threshold. All other miles are gravy, and "free miles".

I will not add to that the regular cost of maintenance. If a major repair is needed, I will first ask myself if I expect to get another 10,000 miles and 1 year of service for every $1,000 I am about to spend.

If a new car costs $24,000, I would require 24 years of trouble free driving, and over 240,000 miles with no major breakdowns. Not likely(and in fact impossible with my 130,000 mileage limit), so those cars are not an option for me.

I do not always meet my target. My worst vehicle has cost me $1,400 per year of use.


My latest:
A 2008 Honda Fit with 73,000 miles for $5,500, bought summer 2018. I am hopeful this will be one of my best vehicles ever.
A 2000 Ford Ranger with 74,000 miles for $1,800, bought 2 days ago. This one is admittedly a gamble. It test drove so well, but is by far the oldest vehicle I ever purchased. I am asking a lot to get another 2 years out of it. My 2002 Ranger blew an engine this summer(only 94,000, bummer). A replacement would have been a used engine with 144,000 miles for $2700 installed. It would never have passed my requirements, so time to say goodbye(this was my $1,400 per year vehicle).

I recommend everyone use a similar comparison in an effort to normalize different cars to see if they were "worth it" for you. If $1,000 is too low for you, just choose an amount you are comfortable with.

ender

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Re: Stop Overpaying for Lightly Used Cars
« Reply #12 on: October 15, 2018, 03:37:34 PM »
We saw the same thing a few years ago looking into buying a Ford Escape.

We paid $16500ish for a brand new Escape with MSRP around $25k. Similar cars that were 2-3 years used were all around 14-14.5k depending on mileage. While we probably paid a slight premium for 2-3 more years of car ownership the gap was much, much, MUCH less than many of the "buy used 4life!" advocates.

I'm a little surprised @radram that you ignore maintenance costs in your calculation.

ysette9

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Stop Overpaying for Lightly Used Cars
« Reply #13 on: October 15, 2018, 09:45:32 PM »
For me, I am all about cost of ownership.

For every $1,000 I spend on the cost of a vehicle, I expect to get 1 year of use, and 10,000 miles. I also expect all cars to be worthless after 130,000, so my 10,000 miles per thousand can not go beyond that threshold. All other miles are gravy, and "free miles".

I will not add to that the regular cost of maintenance. If a major repair is needed, I will first ask myself if I expect to get another 10,000 miles and 1 year of service for every $1,000 I am about to spend.

If a new car costs $24,000, I would require 24 years of trouble free driving, and over 240,000 miles with no major breakdowns. Not likely(and in fact impossible with my 130,000 mileage limit), so those cars are not an option for me.

I do not always meet my target. My worst vehicle has cost me $1,400 per year of use.


My latest:
A 2008 Honda Fit with 73,000 miles for $5,500, bought summer 2018. I am hopeful this will be one of my best vehicles ever.
A 2000 Ford Ranger with 74,000 miles for $1,800, bought 2 days ago. This one is admittedly a gamble. It test drove so well, but is by far the oldest vehicle I ever purchased. I am asking a lot to get another 2 years out of it. My 2002 Ranger blew an engine this summer(only 94,000, bummer). A replacement would have been a used engine with 144,000 miles for $2700 installed. It would never have passed my requirements, so time to say goodbye(this was my $1,400 per year vehicle).

I recommend everyone use a similar comparison in an effort to normalize different cars to see if they were "worth it" for you. If $1,000 is too low for you, just choose an amount you are comfortable with.
130,000 seems like and arbitrary number to draw the line at for mileage. That feels like a young car yet to me, for a Japanese car at least. We sold a Civic with 213,000 miles on the original clutch with no major repairs.
« Last Edit: October 16, 2018, 09:17:16 AM by ysette9 »

chasesfish

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Re: Stop Overpaying for Lightly Used Cars
« Reply #14 on: October 16, 2018, 08:39:16 AM »
If you can drive one vehicle for 15+ years and not have the itch to change, buying new works out okay on a Honda/Toyota.  It can vary by state because car taxes are a nightmare.

I'm at 207,000 and counting on my Honda I bought new.  Wife has a sixteen year old jeep wrangler she got new.


The most economical path is to get good at tinkering with cars and buy fully depreciated vehicles, but you have to love tinkering with cars.  Buddy of mine is a Land Cruiser nut, they're not gas efficient at all but he buys them at 200,000 miles, keeps them maintained himself, and then sells at a profit when he finds the next one.

radram

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Re: Stop Overpaying for Lightly Used Cars
« Reply #15 on: October 16, 2018, 11:01:58 AM »
For me, I am all about cost of ownership.

For every $1,000 I spend on the cost of a vehicle, I expect to get 1 year of use, and 10,000 miles. I also expect all cars to be worthless after 130,000, so my 10,000 miles per thousand can not go beyond that threshold. All other miles are gravy, and "free miles".

I will not add to that the regular cost of maintenance. If a major repair is needed, I will first ask myself if I expect to get another 10,000 miles and 1 year of service for every $1,000 I am about to spend.

If a new car costs $24,000, I would require 24 years of trouble free driving, and over 240,000 miles with no major breakdowns. Not likely(and in fact impossible with my 130,000 mileage limit), so those cars are not an option for me.

I do not always meet my target. My worst vehicle has cost me $1,400 per year of use.


My latest:
A 2008 Honda Fit with 73,000 miles for $5,500, bought summer 2018. I am hopeful this will be one of my best vehicles ever.
A 2000 Ford Ranger with 74,000 miles for $1,800, bought 2 days ago. This one is admittedly a gamble. It test drove so well, but is by far the oldest vehicle I ever purchased. I am asking a lot to get another 2 years out of it. My 2002 Ranger blew an engine this summer(only 94,000, bummer). A replacement would have been a used engine with 144,000 miles for $2700 installed. It would never have passed my requirements, so time to say goodbye(this was my $1,400 per year vehicle).

I recommend everyone use a similar comparison in an effort to normalize different cars to see if they were "worth it" for you. If $1,000 is too low for you, just choose an amount you are comfortable with.
130,000 seems like and arbitrary number to draw the line at for mileage. That feels like a young car yet to me, for a Japanese car at least. We sold a Civic with 213,000 miles on the original clutch with no major repairs.

I agree, it is quite arbitrary. I chose 130,000 because the vehicles I normally buy are only worth about $2,000-$3,000 by the time they reach this mileage, so any major repair (> $1,000) is about 50% of its value. It is around this mileage where, in my experience, a major repair is more of an expectation rather than an unpleasant surprise. It will often be more advantageous to buy 20% of a newer vehicle (like the Fit I just bought) instead of putting it into the older, higher mileage car. Not to mention just because you just made 1 major repair, that does not mean there are not 3 more right around the corner.

Funny thing about car repair and purchase is that you only find out at the end of its life whether or not the car was worth owning, or too expensive.

I guess I would be financially better off if I sold all my cars at the point just BEFORE a major repair is about to be needed (I know, how do you know for sure), but that just feels wrong to me.

I agree with all whom have said that cars can, and often do, get many more miles than 130,000. My dad has been driving the same 90's Cadillac for 25 years. He has spent more that $5,500 in the past 5 years in repairs. There comes a time when maintaining a vehicle just is not worth it. I think his time was about 5 years ago. He disagrees, and he just put another $900 into it last week.

Mississippi Mudstache

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Re: Stop Overpaying for Lightly Used Cars
« Reply #16 on: October 17, 2018, 10:25:29 AM »
I like your thought process, radram, but I include more variables than just purchase price. I estimate MPG and expected fuel costs from fuelly.com. If the vehicle is a hybrid, I include replacement battery costs in the calculation. I average 20,000 miles/year due to my clown commute, and I also assume that the car will last to 200,000 miles and then fall apart. Any extra mileage past 200K is just gravy. If I get an average annual cost of ownership, including purchase price, fuel, maintenance, and taxes, of <$3,000, I consider it a win. That number is damn near impossible to hit with any new car if you're driving 20K miles/year.

CoffeeR

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Re: Stop Overpaying for Lightly Used Cars
« Reply #17 on: October 17, 2018, 01:34:51 PM »
A shout-out to JD Roth for this link today. Of course the author doesn't mention the higher cost of insurance, but it's excellent food for thought:

https://jalopnik.com/stop-overpaying-for-lightly-used-cars-1828576980
I've noticed this for years. The list price of a new car makes a used car seem like a possible option, but once you negotiate the price of the new down and make use of incentives, most lightly used cars appear overpriced to me. Part of the problem is that the negotiating room for used car prices seems to be less than new car prices. I am not sure I understand why, but that is my observation.

When friends of ours told us they were shopping for a one year old car (they did not even consider new) I told then to look at new ones and price compare. They ended up purchasing new.

Now, once the car is 5+ years old (arbitrary number, I do not know the real number), then the $$$ math for used cars make sense. Last two cars I purchased where 5+ years old.